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Aramco – SABIC: How Can The Chinese Investor Benefit From The Merger of The Two Saudi Giants?

The merger of the two Saudi giants will provide great opportunities for Chinese investors in the Kingdom, especially in light of the presence of Sinopec Tianjin Petrochemical Company, a petrochemical company based in Tianjin, China, which was established in partnership between the Chinese Petroleum and Chemical Corporation (Sinopec) and the Saudi Company (SABIC) in 2009.

The deal, which is the largest in the Saudi capital market, will give Aramco a strong presence in the petrochemical sector around the world, which increases significant investment opportunities in the Kingdom, especially for China, which is the largest consumer of petrochemicals in the world, in contrast to what was raised about Beijing’s plans to expand building Ethylene complexes before 2023 in the largest wave of expansions in the petrochemical field in history.

The volume of petrochemical production, according to 2019 figures, for Saudi Aramco and SABIC together reached nearly 90 million tons, including agricultural nutrients and specialty products.

The merger between the two Saudi giants will also create an integrated production chain that starts from oil and gas extraction to refining, and then the manufacture of petrochemical products, which reduces the cost of production, and unifies marketing departments and offices, legal departments, research costs and joint operations at home and abroad, in addition to facilitating investment integration later with International powers, such as China, which has large partnerships with Aramco and SABIC.

Apart from SABIC providing significant growth opportunities to Aramco through the volume of its business, its clear footprint on the global stage and its prominent position as one of the largest chemical companies in the world, it is expected that SABIC will benefit from the volume of business, technologies, investment capabilities and the tremendous growth opportunities that Aramco will bring in terms of integrated production. For Energy and Chemicals, which will overshadow future Chinese investment opportunities.

While SABIC looks to contribute to the growth of the chemical sector at the global level, in parallel with continuing to support the Kingdom’s Vision 2030, “SABIC has been a key partner in China’s industrial renaissance in the past four decades.

As it was not just a company providing the needs of the Chinese market of petrochemical materials, but the company currently has more than 11 sales offices in 11 different Chinese cities, in Shanghai, Guangzhou, Tianjin, and other major cities.

In 2013, SABIC established a technical research office in Shanghai with a value of $100 million on an area of ​​60 thousand square meters, and chose Shanghai to be close to the consumer studying and researching his needs technically and turning them into products that benefit from them in his industry, which makes it the favorite company for the Chinese market, and increases competition from the best of the Chinese market. Other companies.

The Brand Finance report of the top ten chemical companies for the year 2019 ranked SABIC among the three largest chemical companies in the world by value, with a value of $3.96 billion.

As for Aramco, and according to previous statements by Abdulaziz Al-Qadimi, the company’s senior vice president for refining, processing and marketing, it has the financial strength to continue investing in its expansion in the refining, processing and marketing sector despite the impact of the new Corona virus pandemic on global economies.

Thanks to the alignment of Aramco’s business with SABIC’s business in chemicals, according to Al Qadimi, Saudi Aramco will become one of the most important petrochemical companies in the world.

Al-Qadami pointed to the Saudi officials’ confidence that the merger will accelerate the realization of the Kingdom’s strategy in the processing and refining sector, which is an essential part of the company’s growth, by providing an outlet for the petrochemical market, as it is the fastest growing sector in oil demand.

The alignment of Aramco’s extraction and feedstock business with SABIC’s chemical business will create opportunities for synergy to support growth and add value to investors, especially international partners in the Republic of China.